Brief IPOs & Placements: China Tower Corp: Trading Idea Before Lock-Up Expiry and more

In this briefing:

1. China Tower Corp: Trading Idea Before Lock-Up Expiry
2. Bharat Hotels Pre-IPO – Catching up with Peers
3. Dreamtech: Trying for an IPO Again at a Lower Price

1. China Tower Corp: Trading Idea Before Lock-Up Expiry

China Tower Corp, the owner and operator and telecommunication tower network in China, listed on August 8th last year. Over the past six months, the stock has returned 35% with the addition of a number of global investors to its share registry.

• As it heads into lock-up expiry in Feb, in this insight we would like to examine China Tower’s performance since listing.
• We note that China Tower has delivered a decent set of results for 3Q2018 and it will be a key beneficiary of China’s push into 5G built-up with little uncertainty.
• The current valuation of the company was still lower than international tower providers.
• With the improving operating metrics and stable income, we believe there are still upsides for China Tower Corp post-lock-up expiry. 

Our previous coverage on China Tower Corp

• China Tower Corp IPO: An Elephant Still Growing
• China Tower Corp (中国铁塔) IPO: Fairly Valued For One Doing National Service
• China Tower Corp (中国铁塔) Post-IPO: Lacklustre Trading Interest but Looking Forward to 1H Results

2. Bharat Hotels Pre-IPO – Catching up with Peers

Bharat Hotels (BHOT IN) plans to raise around US$150m in its Indian IPO in order to pay down debt. The company owns and operates 12 luxury hotels under “The LaLiT” brand and two mid-market hotels under “The LaLiT Traveller” brand. 

BH has been reporting a steady improvement in operations led by a pick-up in occupancy levels. This has resulted in 30% EBITDA CAGR over FY14-18. 

However, only three out of its 12 hotels seem to be performing consistently and have been increasing their contribution to EBITDA, which was at 76% by FY18. In addition, a comparison with its peer group seems to imply that the company still has some more catching up to do.

3. Dreamtech: Trying for an IPO Again at a Lower Price

• In October 2018, Dreamtech Co Ltd (192650 KS) first provided its initial IPO prospectus but due to difficult market conditions, it withdrew its IPO last year. Dreamtech is trying to complete its IPO again this year for a listing in March. Established in 1988, Dreamtech makes modules and sensors for smartphones, auto vehicles, home appliances, and health care products. 
• The bankers have reduced the IPO price range to 11,000 won to 13,000 won (from 13,400 won to 16,700 won previously). The mid-point of the IPO price range has been reduced by 20% versus its first try at the IPO in 4Q18. 
• The bankers used 15 companies including SEMCO and SimmTech as comparable companies to Dreamtech. The average P/E of the comps is 14.6x (based on the annualized net profit in 1Q-3Q18). The bankers then took the annualized net profit of Dreamtech in 1Q-3Q18 and applied this P/E multiple which resulted in an implied market cap of 540.5 billion won or implied price of 17,286 won. After applying an additional 24.7% – 36.3% IPO discount, this resulted in the IPO price range of 11,000 won to 13,000 won.